How Airbnb Affects Hotel And Hospitality Industry In US

How Airbnb Affects Hotel and Hospitality Industry in U.S

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Date of Submission

Table of Contents

1.0 Introduction ............................................................................................................................... 3

2.0 Literature review ....................................................................................................................... 3

3.0 Research question ..................................................................................................................... 5

4.0 Research design and methodology............................................................................................ 5

4.1 Introduction ........................................................................................................................... 5

4.2 Research design ..................................................................................................................... 6

5.0 Data collection and analysis...................................................................................................... 7

6.0 Time scale ................................................................................................................................. 7

1.0 Introduction

Sharing economy platforms have become very popular in the last couple of years and

have transformed the way people source accommodation facilities, travel, and borrow among

many other activities. Particularly, the influence of Airbnb has grown tremendously in the past

decade capturing the attention of the leaders of the world’s largest hotel companies in the United

States. Airbnb, a pioneer of the “sharing economy” concept, provides travel accommodation and

boasts of serving over thirty million guests since it was founded in 2008 (Teubner, 2014). This

platform connects individuals who are looking for accommodation and those who have space to

share (Farronato and Fradkin, 2015. The service charges a commission on both its hosts and

guests. Since its inception, Airbnb has enjoyed a rapid growth. In fact, the website is now being

used by over fifty-thousand guests per night and operates in more than 30,000 cities and 180

countries. Airbnb has risen quickly and now poses a threat to the hotel industry since travelers

prefer booking with independent hosts via the site rather than the traditional hotel reservation

system.

2.0 Literature review

A rapidly growing body of literature on the impacts of Airbnb on the hotel industry

indicates that the former is indeed competing with and acquiring a large market share from the

latter according to information by industry experts. The Hotel Association of New York

City(HANYC) research of 2014 on the impact of Airbnb on New York’s hotel industry was the

first ever research conducted and disclosed to the public. The study conducted over a period of

twelve months starting September 2014 provided confirmatory evidence of the negative impact

of Airbnb to the tune of $2 billion not only on New York’s hotel industry but also the broader

economy (Lehr, 2015). The threat posed is both direct and indirect. The direct impact of Airbnb

amounted to $450 million whereas the indirect impact was estimated at $1.7 billion over the

twelve-month period.

To theoretically analyze my research question, it is imperative to decode the factors that

attract customers to Airbnb, their perceptions about these services and the aspects that give

Airbnb a competitive edge over the hotel industry. A new survey from Goldman Sachs found out

that travelers seemed to stick with the Airbnb service after trying it for the first time. The survey

polled 2000 participants who were active users of this service. The research established that 80%

of participants who had not used Airbnb preferred traditional hotel services (Guttentag, 2015).

However, for those who had used it, only 41 % preferred the hotel industry over Airbnb. For

most travelers, Airbnb has a pricing advantage over the traditional hotels. It is easier to find

cheap and equally good Airbnb listings in the heart of cities, thus helping travelers on a budget

save a lot of money (Kim and Zo, 2015). Some participants reiterate that an Airbnb room comes

with a personality which reflects the culture and individual style of the host. Most assert that

there is a comforting authenticity knowing that you stay in a real home instead of a room

mimicking a real home (Zervas et al., 2015). Therefore, Price, authenticity, and personality are

some of the factors that render Airbnb a preferred choice of many customers over the traditional

hotel experience (Labrecque et al., 2013).

Airbnb has not materially destroyed the hotel industry yet. However, at the pace at which

it is encroaching into the hotel industry’s market share, there are concerns that it could soon

damage hoteliers (Oskam and Boswijk, 2016). Despite being introduced less than a decade ago,

Airbnb has surpassed many hotel firms globally. The recent surge of this business begs two

questions. Can the rise of Airbnb disrupt the hotel industry or does it cater to a different market

niche? Latest research seemingly indicates that Airbnb occupies the same market niche as hotel

industries. To make matters worse for hoteliers, Airbnb has higher cost advantages than their

competitors can never have. The Airbnb business is fairly self-regulated, allowing the hosts to

abide by simple and generic rules such as supplying first aid kits, emergency contact numbers

and smoke alarms. The business has significantly lowered the barriers to entry into the industry

thus bringing millions of rooms into the hotel market. The largest markets for Airbnb services,

New York, Miami and San Francisco have already suggested that this business can out do the

hotel industry.

3.0 Research question

The research question will look into the competitive edge of Airbnb over traditional

hotels in United States. Therefore, the research question will be; What is the impact of Airbnb on

independent budget hotels(IBH) in United States? I will try to investigate if Airbnb proliferation

is negatively affecting IBH in the US and whether the demand of Airbnb will diminish or

continue its upward surge in the upcoming years. More importantly, it would be erroneous to

overlook the customer perceptions of these two services, Airbnb, and hotels. I will, therefore,

evaluate the rationale pertaining the decision-making process of Airbnb users. It would also be

prudent to explore hotel and house regulations hindering or benefiting independent budget

hotels, Airbnb or both.

4.0 Research design and methodology

4.1 Introduction

The study examines the factors constituting the market needs correspondence through a

survey. Westat will conduct the survey with the purpose of researching;

1. The impact of Airbnb on Independent budget hotels.

2. The needs of consumers when booking accommodation

3. How the two services (Airbnb and Traditional hotel services) address consumer needs.

4. Government regulations promoting or inhibiting the expansion of Airbnb service, the hotel

industry or both.

Particular attention will be paid on varying consumer needs based on the motivation of their

travel, whether pleasure or business.

4.2 Research design

The grounded theory will be used to explain the impact of the construct of trust on the

internet. Ert and Magen (2015) assert that the Matching of the host and the and the client calls

for mutual trust. Therefore, the research will elaborate some of the initiatives of Airbnb in

building high levels of trust between the host and guest such as consumer reviews and a

verification of the identity of both the host and the guest. By conducting a statistical analysis of

feedback from 2000 respondents, the research will analyze the influence of this information on

consumer choices thus determining the significance and informing on whether to validate or

reject my null hypotheses. Qualitative research provided by the participants will further support

my findings and inform on the directions for future research in this field.

The following hypotheses will stand out in my research.

Hypothesis 1

H0: The Airbnb industry is significantly encroaching into the hotel industry’s market share.

H1: The Airbnb industry poses no significant threat to the hotel industry presently and in the near

future.

Hypothesis 2

H0: Pricing, personality and authenticity drive consumers’ choice of Airbnb services over the

traditional hotel experience.

H1: Pricing, personality, and authenticity do not significantly motivate consumer preferences of

the Airbnb and hotel industries.

5.0 Data collection and analysis

A survey stands out as the most useful tool for data collection in this research since it is

cost effective, can be administered efficiently remotely through email, mobile devices, and

online platform, it is capable of collecting information from a large number of respondents. More

importantly, a survey can collect a broad range of data including opinions, attitudes, values and

beliefs which are, by and large, the information I will be seeking in this research (Flick et al.,

2004). The survey will constitute a representative sample size of 2000 respondents sourced

across all the fifty states of United States. The inclusion criteria require the participants to be

residing in the United States and be over the age of 18. More so, they should have actively

engaged with the Airbnb service in the past six months with at least one reservation booked

through this service. The data collection process will aim at capturing the demographical

information of respondents, their age group, income bracket, motivations for traveling and their

perceptions about the two accommodation services. The qualitative research will establish the

participants brand loyalty for Airbnb by asking the respondent to ascertain whether Airbnb is a

substitute for hotel service. A p-test will be used to ascertain the significance of the hypotheses.

A significance value of 7% will inform on whether to accept or reject the null hypotheses.

6.0 Time scale

Task Name

Duration

Start

Finish

Literature

12 weeks

Tue 15/11/2016

Mon 13/11/2017

Proposal submission

1 day

Tue 14/11/2017

Tue 14/2/2017

Obtaining resources

0.6 weeks

Wed 15/2/2017

Sat 18/2/2017

Data collection

1 week

Mon 20/2/2017

Mon 27/2/2017

Statistical tests

2 weeks

Tue 28/2/2017

Tue 11/3/2017

Data analysis

8 weeks

Thu 13/3/2017

Tue 13/6/2017

Write up

10 weeks

Wed 14/6/2017

Mon 28/8/2017

Submission of drafts

1 day

Tue 29/8/2017

Editing

5 weeks

Wed 30/8/2017

Sat 7/10/2017

Final submission

1 day

Mon 9/10/2017

Bibliography

Ert, E., Fleischer, A. and Magen, N., 2015. Trust and Reputation in the Sharing Economy: The

Role of Personal Photos on Airbnb. Available at SSRN 2624181.

Farronato, C. and Fradkin, A., 2015. Market Structure with the Entry of Peer-to-Peer Platforms:

The Case of Hotels and Airbnb. Q Stanford University, in progress.

Flick, U., von Kardoff, E. and Steinke, I. eds., 2004. A companion to qualitative research. Sage.

Guttentag, D., 2015. Airbnb: disruptive innovation and the rise of an informal tourism

accommodation sector. Current issues in Tourism, 18(12), pp.1192-1217.

Kim, J., Yoon, Y. and Zo, H., 2015. Why people participate in the sharing economy: A social

exchange perspective. PACIS 2015 proceedings (Paper 76).

Labrecque, L.I., vor dem Esche, J., Mathwick, C., Novak, T.P. and Hofacker, C.F., 2013.

Consumer power: Evolution in the digital age. Journal of Interactive Marketing, 27(4),

pp.257-269.

Lehr, D.D., 2015. An analysis of the changing competitive landscape in the hotel industry

regarding airbnb.

Oskam, J. and Boswijk, A., 2016. Airbnb: the future of networked hospitality

businesses. Journal of Tourism Futures, 2(1), pp.22-42.

Teubner, T., 2014. Thoughts on the sharing economy. In Proceedings of the International

Conference on e-Commerce (Vol. 11, pp. 322-326).

Zervas, G., Proserpio, D. and Byers, J., 2015. A first look at online reputation on Airbnb, where

every stay is above average. Where Every Stay is Above Average (January 28, 2015).

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